Hong Kong Retail Association: Comprehensive customs clearance and mainland consumers' impact on Hong Kong's Lunar New Year retail performance Industry business differs by 20 to 30 percent compared to 2018.

In January, Hong Kong's retail sales growth slowed to 0.9% year-on-year, far below the market expectation of 6.9%. The Executive Director of the Hong Kong Retail Management Association, Law Chun-bong, believes that last January Hong Kong had not fully opened its borders, so most Hong Kong people stayed in the city to shop and celebrate the Lunar New Year, resulting in a high base figure. However, this year with the borders fully open, the spending power of mainland Chinese tourists has decreased compared to before the pandemic, and the trend of Hong Kong people shopping in mainland China continues to affect local retail, leading to only a slight increase in retail sales in January. According to a survey conducted by the association, compared to the same period last year, 44% of the surveyed members reported single to double-digit growth in business from the first to the eighth day of the Lunar New Year, especially in cosmetics, personal care products, and watches and jewelry. However, 56% of members reported a single to double-digit decrease in business, particularly in supermarkets and electronics retailers related to the local retail industry. The survey also indicated that compared to a normal year like 2018, this year's business for the surveyed members still has a gap of two to three tenths. Although there were 1.48 million visitors to Hong Kong during the Lunar New Year, the local and tourism markets have still declined compared to 2018, mainly because current travelers prioritize immersive experiences over shopping. Nevertheless, Law cited retail businesses stating that with the launch of new products and discount promotions by certain brands, business and foot traffic are expected to return to normal in March. Furthermore, in regards to the expansion of two additional mainland cities for Individual Visit Scheme travelers, he believes it will improve overnight visitor performance. However, as travelers currently focus on cultural experiences, it is still necessary to observe how this will impact the Hong Kong economy. He also suggested that the government increase the total value of duty-free goods mainland visitors can bring back to China from 5000 RMB to 30,000 RMB.